Unlawful Termination in the Philippines

Written By Harold Respicio

Below is a comprehensive discussion on Unlawful (or Illegal) Termination in the Philippines, often referred to as "illegal dismissal." It is written with reference to Philippine labor law—primarily governed by the Labor Code of the Philippines (Presidential Decree No. 442, as amended), as well as jurisprudence (cases decided by the Supreme Court), and related issuances by the Department of Labor and Employment (DOLE) and the National Labor Relations Commission (NLRC).

1. Overview: The Principle of Security of Tenure

In the Philippines, employees enjoy a constitutionally and statutorily protected security of tenure. This principle means that once an individual becomes a regular employee, the employer cannot dismiss that employee without a lawful basis. The Labor Code states:

“In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by [the Labor Code].” (Renumbered Article 294 of the Labor Code)

As a result, any termination made without adherence to the grounds or procedures set out in the Labor Code is considered unlawful or illegal dismissal.

2. Legislative Framework Governing Termination

  1. Labor Code of the Philippines (PD No. 442, as amended)

    • Contains the substantive and procedural requirements for lawful termination.
    • Articles (renumbered) provide explicit just and authorized causes for dismissal.

  2. Department of Labor and Employment (DOLE) Issuances

    • DOLE Department Order No. 147-15 (Guidelines on the termination of employment, covering procedural due process and notice requirements).

  3. Jurisprudence

    • Supreme Court decisions interpreting the Labor Code. These decisions provide detailed guidelines on how courts and labor tribunals determine the lawfulness or unlawfulness of a dismissal.

  4. Constitution

    • Recognizes labor as a primary social economic force and upholds the security of tenure for workers.

3. Just Causes and Authorized Causes

3.1. Just Causes (Related to Employee Fault or Misconduct)

Under the Labor Code (renumbered Articles 297, 298, etc.), just causes generally involve an employee’s culpable acts or omissions. Common just causes include:

  1. Serious Misconduct or Willful Disobedience

    • Serious misconduct refers to improper or wrongful conduct that is grave in nature and directly related to the performance of the employee’s duties, showing a wrongful intent or a perverse attitude.
    • Willful disobedience involves the employee’s intentional refusal to obey a lawful and reasonable order of the employer.

  2. Gross and Habitual Neglect of Duties

    • Neglect must be both gross (serious in character) and habitual (repeated). An isolated or minor neglect of duty might not be enough.

  3. Fraud or Willful Breach of Trust

    • Typically used where employees handle money or property, or occupy positions of trust/confidence. Acts of dishonesty or breach of trust can justify dismissal.

  4. Commission of a Crime or Offense Against the Employer, Employer’s Family, or a Representative

    • Commission of an offense punishable under the law that targets the employer or the employer’s family/agent.

  5. Other Analogous Causes

    • Any cause similar to or analogous to those listed. Courts often require that it be similar in gravity and effect to the enumerated just causes.

3.2. Authorized Causes (Business or Economic Reasons)

Authorized causes arise from business or economic necessities or health-related reasons (renumbered Articles 298–299 of the Labor Code):

  1. Redundancy

    • Exists when the services of an employee are in excess of what is required by the enterprise. Employers must prove good faith and fair criteria in implementing redundancies.

  2. Retrenchment to Prevent Losses

    • A cost-cutting measure resorted to by the employer to reduce the workforce in order to prevent or minimize losses. Must be done in good faith.

  3. Closure or Cessation of Business Operations

    • Applies when the employer decides to cease operations entirely or partially. Can be for various legitimate business reasons, not necessarily due to losses.

  4. Disease

    • When an employee has a disease and continued employment is prohibited by law or detrimental to the employee's or co-employees’ health.

Important: Authorized causes typically require the employer to pay separation pay, the amount depending on the specific cause (e.g., one month’s pay per year of service or one-half month’s pay per year of service, depending on the reason).

4. Procedural Due Process Requirements

4.1. For Just Causes

Often referred to as the “twin-notice rule”:

  1. First Notice (Show-Cause Notice)
    • The employer must give the employee a written notice detailing the specific acts or omissions constituting the ground for dismissal and giving the employee a chance to explain or defend themselves.
  2. Second Notice (Notice of Decision)
    • After the employer evaluates the employee’s explanation, they must issue a second written notice informing the employee of the employer’s decision (dismissal or lesser disciplinary penalty).

Failure to follow this procedure—even if there is a valid just cause—may render the dismissal procedurally infirm, possibly making the employer liable for nominal damages.

4.2. For Authorized Causes

  1. Notice to Employee and DOLE

    • Written notice to the affected employee at least 30 days before the intended date of termination.
    • Written notice to the Department of Labor and Employment (DOLE) also at least 30 days prior, stating the reasons for the closure/retrenchment/redundancy, etc.

  2. Separation Pay

    • Required for most authorized causes, to be given as mandated by the Labor Code.
    • Amount depends on the grounds: e.g., redundancy generally requires one month’s pay per year of service; retrenchment or closure not due to serious losses requires at least one-half month’s pay per year of service.

5. What Constitutes Unlawful (Illegal) Termination?

A termination becomes unlawful or illegal if any of the following occurs:

  1. Lack of Valid or Authorized Cause

    • The employer failed to prove any just or authorized cause recognized by law.

  2. Violation of Procedural Due Process

    • For just causes: lack of proper notices or failure to conduct an investigation.
    • For authorized causes: lack of required notices to both employee and DOLE, or failure to give the mandated separation pay where required.

  3. Constructive Dismissal

    • Occurs when an employer’s acts (e.g., demotion, harassment, forced resignation, workplace conditions) leave the employee no choice but to resign. Though not an outright dismissal, the law treats it as illegal termination if proven.

6. Remedies & Consequences of Illegal Dismissal

If the dismissal is ruled illegal, the employee is generally entitled to:

  1. Reinstatement

    • Restoration to the former position without loss of seniority rights and other privileges. If reinstatement is not feasible (for instance, due to strained relations or closure of the business), “separation pay in lieu of reinstatement” is awarded.

  2. Full Back Wages

    • Wages that would have accrued from the date of dismissal up to finality of the decision or actual reinstatement.

  3. Damages

    • In some cases, moral and/or exemplary damages may be awarded, especially if the dismissal was done in bad faith or in a manner that humiliates or degrades the employee.

  4. Attorneys’ Fees

    • If the employee was forced to litigate, the court or labor tribunal may award attorney’s fees.

7. Filing a Complaint: Legal Process

  1. Single Entry Approach (SEnA)

    • Before lodging a formal complaint, the parties typically undergo a mandatory 30-day conciliation-mediation period with DOLE (unless an exemption applies).
    • Purpose is to settle disputes amicably and quickly without resorting to full litigation.

  2. National Labor Relations Commission (NLRC)

    • Has original and exclusive jurisdiction over illegal dismissal cases.
    • An employee who believes they have been unlawfully terminated files a complaint with the NLRC or the appropriate Regional Arbitration Branch.

  3. Appeals

    • Decisions of the Labor Arbiter can be appealed to the NLRC, then to the Court of Appeals, and ultimately to the Supreme Court on questions of law.

8. Practical Considerations for Employers and Employees

  • Documentation: Employers should maintain proper documentation for disciplinary cases and for retrenchment/ redundancy programs to ensure compliance with legal requirements.
  • Fair Criteria and Good Faith: Especially in cases of redundancy or retrenchment, employers must adopt fair and objective criteria (e.g., efficiency, seniority, performance) and apply these in good faith.
  • Transparency: Communicating clearly with employees—both in disciplinary procedures and in authorized cause terminations—can reduce disputes.
  • Timely Response: Employees who suspect illegal dismissal should promptly seek legal advice and file a complaint within the statutory periods to protect their rights.

9. Key Supreme Court Doctrines and Cases

Several landmark Supreme Court rulings illuminate the contours of unlawful termination:

  • G.R. No. 164774 (2008): Clarified that a mere “lack of trust” without proven misconduct is insufficient to dismiss an employee for loss of trust and confidence.
  • G.R. No. 173871 (2010): Reiterated that procedural due process is mandatory, and non-compliance subjects the employer to liability for damages even when just cause is present.
  • G.R. No. 176985 (2013): Illustrated that the employer’s claim of redundancy must be supported by “substantial evidence,” such as new staffing patterns, feasibility studies, or audited financial statements.

These are representative examples; the Supreme Court regularly issues decisions that refine or underscore the principles laid down in the Labor Code.

10. Conclusion

Unlawful (Illegal) Termination in the Philippines arises when an employer dismisses an employee without either (a) a legally recognized ground or (b) compliance with mandatory procedures. Guided by the constitutional guarantee of security of tenure, the Labor Code stringently protects workers from wrongful dismissal while balancing the legitimate business interests of employers.

Employers must ensure that dismissals are based on clearly established just or authorized causes, respecting procedural due process every step of the way. Conversely, employees who believe they have been illegally dismissed have recourse through the NLRC and the courts. Ultimately, strict adherence to the Labor Code and relevant DOLE regulations promotes a fair, predictable, and transparent employment landscape in the Philippines.

Disclaimer

This article is meant for general informational purposes and not as legal advice. For specific situations, it is prudent to consult a qualified labor law practitioner or seek guidance from the Department of Labor and Employment (DOLE) or the National Labor Relations Commission (NLRC).

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

Harold Respicio
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